Lindell’s CHAPTER 11 Notes
SALES-PROMOTION AND DIRECT MARKETING PROGRAMS
Sales promotions include all short-term offers directed at buyers,
retailers, or wholesalers and are designed to achieve a specific andimmediate response. Trade promotions are directed toward retailers and
wholesalers and include cash and merchandise allowances, equipment, and
awards to such firms or to their personnel.
Sales-promotion objectives
program is selected.
should
be
established
before
a
specific
A.
There are five basic types of buyer actions that can be stimulated by
sales promotions: inquiries, product trial, repurchase, traffic building,.
and increased rate of purchase.
.B. The fundamental purposes of trade promotions are to push the product
through marketing channels or to pull the product through the channel.
Examples. of trade promotions objectives include inventory building and
promotional support.
III. The sales-promotion objective should support the marketing strategy for
the product, and managers should examine the buying process to understand the
likelihood of response to a type of incentive.
A.
Many promotions are ineffective and too costly due to coupon redemption
rats, displaced sales or stocking-up. Other factors that effect the
effectiveness of sales promotions is size loyalty of consumers, the amount
and type of search involved, and the brand's equity.
B.
Trade promotions designed to achieve inventory building or promotional
support are often met with specific problems in achieving these objectives.
1.
Many trade buyers respond to promotions by purchasing for normal
inventory.
2.
Trade buyers often accept incentives but fail to
perform the promotional requirements expected.
3.
Some retailers make purchases beyond their own requirements during price
deals and then resell the discounted merchandise to other' retailers at a
profit.
Sales and profit consequences of sales promotions are difficult to predict.
Basic elements of the sales promotion budgeting process are shown in Fig.
11-1.
Please notice the PICK A PEACH Promotion. This illustration combines direct
marketing with sales promotion and personal selling.
1.
Promotions include both direct fixed costs and variable costs. A
problem in estimating costs is because contribution margins are reduced
only on items purchased at promotional prices. Sales response estimates and
levels of mis redemptions should be considered in projecting costs.
2.
Redemption, displacement and stock-up rates must be considered as well
as acquisition rates, conversion, rates, and product-line effects.
3.
Profitability implications are assessed by comparing the "normal"
contribution over the period of the promotion with the expected promotional
contribution.
IV. Direct marketing programs have become more widely adopted because of
expanded credit-card ownership and increased computing power that
facilitates database storage and analysis
A.
Direct marketing programs can achieve a variety of objectives.
1.
Direct marketing can be used to expand the customer base by attracting
non-users or acquiring competitor's customers.
2.
Customer relationships can be expanded through cross-selling programs
and upgrading programs.
3.
Retention of customers can be achieved by targeted discounts and
frequency programs.
4.
Former customers can be reactivated by targeting them with incentives.
B.
The effectiveness of a direct marketing program depends on how
effective it is in generating the desired response and the cost and profit
consequences.
The marketing database should be designed to identify the best
prospects f or the marketing offer.
1.
2.
Direct marketers need to segment their customer base on purchase
history using data of recentcy, frequency, and monetary value.
3.
Purchase history and profile information can assist in the design of
incentives and select new prospects that share common characteristics with
the firm's best customers.
CHAPTER 12
SALES AND DISTRIBUTION PROGRAMS
Sales and distribution programs include all the activities
involved in transferring goods and providing assistance and
information to buyers or to wholesale or retail distributors.
A.
marketers can employ three basic types of sales and marketing channel
systems 3r~ direct personal selling systems, trade selling systems, and
missionary selling systems.
B.
A distribution channel is a set of organizational participants that
perform all the functions required to get a product from a seller to the
final buyer. The structure is determined by the tasks and activities
performed by intermediaries, the type of distributor, and the number of
each type of distributor.
C.
Vertical marketing systems are types of channels in which distributor
actions are highly coordinated with the manufacturer's marketing strategy
because a strong, continuing, formal relationship has been established.
Vertical marketing systems can be corporate, contractual, or administered.,
II. In general, four kinds of sales and distribution objectives can be
employed: account development, distributor support, account maintenance,
and account penetration.
III. Sales appeals are the basic elements of the marketing offering that
the sales force will communicate, and they reflect the benefits that a
seller will offer to obtain the type of customer or distributor response
stated in the program objective.
A.
Product appeals reflect the specific product-related benefits that
buyers will gain from using a product or that distributors will gain from
having the product in their assortments.
B.
Logistical appeals reflect benefits for buyers or distributors in
reducing their inventory through faster order processing, more frequent
delivery, and more expedient delivery.
C.
Protective provisions represent specific. policies designed to reduce
buyer and distributor risk in accepting a product.
D.
Simplification appeals are designed to enable the buyer or distributor
to reduce the costs of handling or using the product.
E.
Price appeals often come in the form of price shading when the sales force has some latitude on the actual
price to be charged -and. may price "below list" if
necessary.
F.
Finaricial-assistance appeals usually come in the form of
credit and cash discounts.
IV. The personal interaction between the sales force and the buyers and distributors has two
basic functions: to develop
an understanding of buyer or distributor requirements so that management can select
appropriate appeals and to maintain a power or influence relationship with buyers or
distributors to successfully implement the appeals.
A.
There are five bases of power: reward, coercive , expert,
referent, and legitimate.
B.
Power relationships can change ove ' r time. Recent growth
of vertical and multi-channeLl systems has increased need
for relationships based on more cooperation, partnership,
and distribution programming rather than solely on basis
of power.
C.
The primary bases of power available to the salesperson
are expert, referent, and reward power. The
effectiveness of the sales force is often dependent on
the degree to which a salesperson - is successful in
employing social influence (power).
CHAPTER 13
MANAGING SALES AND DISTRIBUTION
In designing a program to achieve a sales and distribution objective, sales
managers shoufd attempt to estimate the budgetary consequences of the
program.
A.
Analysis of sales-force compensation costs include estimation of
required call frequency (which depends o account size, sales and distribution
objectives, the nee for unplanned calls, and the estimated sales effects fo
increaging or decreasing the number of calls per account and estimation of
sales force call capacity (which i affected by territorial allocation and the
number o salespeople).
B.
special compensation costs include sales commissions bonuses, and
special incentives.
C.
Because of the high cost of having a company sales force many firms use
manufacturer's representatives, whi usually sell the lines of a number of f
irms within i specif ic industry and operate on a percent-of -salei
commission basis.
1 . The advantages of manufacturer's reps are that thei have better
knowledge of customer or distributoi needs and they provide better coverage
of smal: accounts.
2.
The critical advantage of the company sales forc( lies in control over
performance.
D.
Because the cost of money has increased, inventory and credit appeals
have become more important to buyers, and the costs - associated with
providing credit haE increasingly been linked to sales budgets.
E . Physical distribution costs due to increases in rus1h orders and more
frequent delivery schedules must be considered as a direct cost and,~charged
to the sales and distribution budget.
F.
The variable-contribution-margin ef fact of of faring price appeals such as cash discounts, quantity discounts, cumulative quantity discounts,
and price shading - must also be considered.
G.
Once a manager has identified the costs and margin reductions associated
with providing a given set of appeals, the sales budget can be established
and finalized.
To measure the effectiveness of sales and distribution programs and to
identify opportunities for improved resource utilization, managers must
employ some procedure for performance evaluation.
A.
Managers must evaluate the performance of individual sales and
customer service personnel and individual distributors on results-oriented
and ef fort-oriented measures such as:
1.
2.
Awarding bonuses and incentives
Identifying personnel or distributors in need of additional training
3.
Identifying problem accounts or geographical areas
4.
Determining new or additional distributor needs
B.
Managers must evaluate sales territory performance in terms of
achievement of objectives and profitability.
C.
Managers must evaluate sales segment performance using sales analysis
or distribution cost analysis.
1 . Sales analysis aggregates sales reports of individual salespeople to
permit management to identify areas where performance is different from
expectations or from past trends.
2.
Distribution costs analysis compares the profitability of sales
segments. The emphasis is on assessing the costs incurred to generate the
achieved level of sales.